May 8, 2020 / 7:40 PM / 3 months ago

EMERGING MARKETS-Latam markets rally on Sino-U.S. optimism; Argentina debt deadline eyed

    * Argentine stocks outperform peers for week
    * Most Latam currencies eye weekly gains
    * Real set for sharp weekly loss

 (Adds comment on real, updates prices)
    By Susan Mathew and Ambar Warrick
    May 8 (Reuters) - Brazil's real firmed for the first time
this week, bouncing from all-time lows, while most other Latin
American currencies strengthened on Friday on signs that
tensions between the United States and China were easing. 
    Except for the real, most currencies were also set for
weekly gains as optimism over major economies re-emerging from
coronavirus-related lockdowns bought a measure of risk appetite
to markets. 
    Positive dialogue between Beijing and Washington soothed
investor concerns over a renewed trade spat between the two.

    "The last thing global investors need right now amid the
global coronavirus pandemic is a one-two punch from spiking
trade war risks," wrote Han Tan, market analyst at FXTM. 
    The U.S. dollar rose after data showed the world's largest
economy lost fewer jobs than expected last month.
    Brazil's real rose 1.6% as the once unthinkable level
of 6.00 to the dollar remained in sight. The currency plunged to
new lows on Thursday after the central bank delivered a deeper
cut in interest rates than expected.
    The real was set to lose nearly 5% for the week, and
is among the worst performing emerging market currencies this
year.
    "There are downside risks for the BRL, firstly because the
outlook for the economy could deteriorate further, and secondly
because criticism of (President Jair) Bolsonaro's crisis
management could increase and exacerbate the political crisis,"
wrote You-Na Park-Heger, FX and EM analyst at Commerzbank.
    Currencies of Mexico, Colombia and Chile
 all rose around 1%, tracking gains in oil and base metal
prices.
    Stocks followed suit, with those in Brazil in the
lead. Mexican shares rose 2%, while Colombian shares
 added 0.8%.  
    Argentine markets were filled with uncertainty as the
government's deadline for bondholders to agree to its debt
restructuring offer was only hours away.

    The twin economic and debt crises have driven a huge gap
between the Argentine peso's official rate, kept almost
static by capital controls, and tumbling black market and other
unofficial rates.
    Still, Argentine stocks were set to outperform their
peers for the week with a more than 11% gain, as major utilities
and miners in the country were seen on stable ground even amid
the coronavirus crisis.
    Colombia's central bank had earlier this week said it
expects a contraction of between 2% and 7% in gross domestic
product this year due to pandemic-driven impact on productivity.

    Analysts at Credit Suisse expect a contraction of 4.1%. 
    Key Latin American stock indexes and currencies at 1921 GMT:
    
    Stock indexes             Latest       Daily % change
 MSCI Emerging Markets          911.42                  1.62
                                        
 MSCI LatAm                    1626.59                  4.04
                                        
 Brazil Bovespa               80288.98                  2.78
                                        
 Mexico IPC                   37560.50                  2.09
                                        
 Chile IPSA                    3916.39                 -2.08
                                        
 Argentina MerVal             36444.05                 1.656
                                        
 Colombia COLCAP               1121.85                  0.76
                                        
                                                            
       Currencies             Latest       Daily % change
 Brazil real                    5.7486                  1.61
                                        
 Mexico peso                   23.7580                  1.15
                                        
 Chile peso                      826.5                  1.00
                                        
 Colombia peso                 3891.72                  0.57
 Peru sol                       3.4068                 -0.15
                                        
 Argentina peso                67.2700                 -0.12
 (interbank)                            
                                        
 
    

 (Reporting by Susan Mathew in Bengaluru; Editing by Steve
Orlofsky and Sonya Hepinstall)
  
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